News that Shanda Interactive had taken a big stake in Sina.com re-ignited takeover speculation in Chinese Internet stocks on Tuesday.

Shares of Sina surged 11% after the company revealed that Shanghai-based Shanda and its controlling shareholder had taken a 19.5% stake and could made a bid to acquire the company. Sina also announced that it had adopted a shareholder rights plan and is buying back stock.

The news boosted shares of Sohu , which has also been the subject of takeover rumors, and NetEase also climbed on what was otherwise a difficult day for stocks.

The Nasdaq fell 28 to 2058, the S&P 500 tumbled 17 to 1184, and the Dow plunged 174 to 10,611. Volume rose to 1.74 billion shares on the NYSE, and 2.08 billion on the Nasdaq. Decliners led 26-7 on the NYSE, and 23-8 on the Nasdaq. Downside volume was 84% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 214-38 on the NYSE, and 76-64 on the Nasdaq.

After the close, Autodesk and Novell beat estimates, and NetEase met estimates.

During the day, Rambus climbed 2% on a favorable court ruling in the company's long-running patent case.

Level 3 soared 18% after the company obtained financing and eliminated takeover protections.